Decentralized autonomous organization

Decentralized autonomous organization is associated with a specific use of a type of distributed database called a Block chain.

Terminology

Firm

In its typical implementation as publicly auditable rules distributed across the computers of the stakeholders, the DAO can be thought of in a neoclassical sense as a production function or production possibilities set, a black box that transforms inputs into outputs. The DAO can be modeled as a single actor, facing a series of mathematical calculations, implicit in the non-self-verifying data, determined by the characteristics of the production function. The reason that the DAO can exist is because market coordination without it fails due to lack of necessary intersubjective points of orientation, that is, lack of so-called Schelling points. The emergence of behavior-coordinating Schelling points is a characteristic of the way that the DAO is coded.[1]

Entrepreneur

The entrepreneurship of the DAO's development process can be thought of in a Schumpeterian sense as an exceptional occurrence of massive importance. The programmers who develop and launch the DAO are persons who by introducing "new combinations" shake the economy out of its previous equilibrium, starting a process Schumpeter termed creative destruction.[2] This speaks to the tenuous relationship between the developers and the DAO they own or contract with, because Schumpeterian entrepreneurship is sui generis (independent of its environment).[3][4]

Legal issues

As of 2014, DAOs had no way to indemnify users since they lack legal personality and may have either no cash-flow or no assets. Accordingly, recovery in the event that a given DAO fails could turn out to be extremely difficult in practice. Consequently, for example, if a DAO had funds, they would typically be able to indemnify specific users (namely exchanges) through corporate insurance (a bond).[5] According to Austin Brister, a Houston-based attorney:

Consumer protection laws can be far-reaching and quite unforgiving. Ordinary businesses do just fine in navigating these laws, even if they don't realize it, because they can adjust their interactions with consumers in "real-time" in order to be reasonable, well-centered, and act in good faith in dealing with consumers. However, the problem with smart contracts, decentralized autonomous organizations, and the like, is that they are hard-wired to act in one way, whether it makes sense or not.

Unforeseeable circumstances practically always present themselves to businesses of all types, and by definition, these circumstances cannot be foreseen or planned for. These systems need to adequately plan for this possibility, and be prepared to be properly insured or adequately bonded in the event things go wrong, and customers are hurt. Similarly, consumers should be aware that they are not dealing with living breathing people, but rather a machine subject only to 0's and 1's.[5]

Self-modification layer

This layer also allows the DAO to set an upper bound on the losses caused by any malicious collusion.[6]

Hiring employees

Making a fine-grained evaluation of an individual human employee is likely impossible. The best solution is likely to simply use monetary incentives to direct people’s actions on a coarse level, and then let the community self-organize to make the fine-grained adjustments. The extent to which a DAO targets a community for investment and participation, rather than discrete individuals, is the choice of its original developers.[7] On the one hand, targeting a community can allow your human support to work together to solve problems in large groups. On the other hand, keeping everyone separate prevents collusion, and in that way reduces the likelihood of a hostile takeover.[8]

See also

References

  1. ↑ Malmgren, H. B. (1961). "Information, Expectations and the Theory of the Firm". Quarterly Journal of Economics 75: 399-421.
  2. ↑ Becker, Marcus C.; Thorbjørn Knudsen (2003). "The Entrepreneur at a Crucial Juncture in Schumpeter’s Work: Schumpeter’s 1928 Handbook Entry Entrepreneur". Advances in Austrian Economics 6: 199–234.
  3. ↑ Foss NJ, Klein PG. Organizing Entrepreneurial Judgment: A New Approach to the Firm. Cambridge University Press. (2012). ISBN 9780521874427
  4. ↑ Foss NJ, Klein PG. Authors Forum:Organizing Entrepreneurial Judgment: A New Approach to the Firm. 2012 Austrian Scholars Conference, recorded 8 March 2012 at the Ludwig von Mises Institute in Auburn, Alabama.
  5. 1 2 Swanson, Tim. "Mitigating the Legal Risks of Issuing Securities on a Cryptoledger". CoinTelegraph. Cointelegraph. Retrieved 11 July 2014.
  6. ↑ DeFigueiredo, Dimitri do B. "TrustDavis: A Non-Exploitable Online Reputation System". Department of Computer Science, University of California at Davis. Retrieved 2 July 2014.
  7. ↑ Engineering Economic Security (YouTube). Silicon Valley Ethereum Meetup: EtherCasts. 2014. Retrieved August 11, 2014.
  8. ↑ Buterin, Vitalik. "Bootstrapping An Autonomous Decentralized Corporation, Part 2: Interacting With the World". Bitcoin Magazine™. Coin Publishing Ltd. Retrieved 22 November 2013.

External links

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